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February 5, 2013

Libertas’ Koos Banks on International ETFs

With the U.S. economy so precariously positioned as a result of the sequester and Europe still on the rocks, investors have no choice but to look at the rest of the world to get satisfying returns for taking on a decent amount of risk.

Therefore Adam Koos, founder of Libertas Wealth Management based in Dublin, Ohio, doesn’t give his clients the choice when it comes to international investing. The world is large, he says, and there are plenty of opportunities to choose from, particularly if one assesses, as Koos does, the plethora of international investment choices on a relative strength basis.

“I like to look at it as an arm wrestling match that compares all asset classes, domestic as well as international, for momentum,” Koos (left) said. “Whichever four asset classes are in the top four categories based on that comparison, those are the ones I go with.”

Right now, international equity is in third position (domestic equity is at the top of the list), based on Koos’ own ranking system that compares his four asset classes chosen for their relative strength to each other, as per the number of “buy” signals they each generate. He then slices and dices his international section further, based again on relative strength of different markets and asset classes, before selecting which international ETFs to invest in.

ETFs are Koos’ chosen method of investing internationally. Though there are myriad ways to buy international stocks, ETFs offer the best options for investors, he says. Not only are there dozens of different ETF options on the market—many of which are niche products that allow investors to take advantage of a very specific segment of a particular country’s industry—but ETF investors don’t need to worry about trading volumes like investors who buy individual stocks, he said.

Koos also feels that many individual emerging market stocks are too pricey right now, so it makes better sense to buy an ETF, and since ETFs are based on a diversified index of underlying stocks, investors who buy them don’t need to be as well versed in the ins and outs of the politics and economics of different countries, he said.

Nevertheless, one has to be keyed into what’s going on in the world in order to maximize the ETF potential, and Koos uses technicals rather than fundamentals to decide where he thinks it’s best to invest.

Within the emerging markets, he likes the technicals of countries including the Philippines, Mexico, Malaysia, Peru and South Korea.

“They’re all smaller than Brazil, Russia, India and China,” he said, “and while I don’t think the BRICs are going to go away anytime soon, they have reached a plateau stage where they’ll be at before they start to make money again. But these other countries are quickly emerging from being frontier-market nations to being the next Chinas.”

Koos also has his eye on Turkey, a country he feels presents a lot of opportunity. However, Turkey is just too pricey right now, he says, as it has been extremely overbought, so he will be waiting for a market correction before zeroing in on Turkey.